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The board of Olin Corporation (NYSE:OLN) has announced that it will pay a dividend on the 13th of June, with investors receiving $0.20 per share. The dividend yield will be 3.6% based on this payment which is still above the industry average.
We've discovered 4 warning signs about Olin. View them for free.
Olin's Future Dividend Projections Appear Well Covered By Earnings
A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 152% of what it was earning. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.
Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 27%, which would make us comfortable with the dividend's sustainability, despite the levels currently being elevated.
Check out our latest analysis for Olin
Olin Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The most recent annual payment of $0.80 is about the same as the annual payment 10 years ago. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
Olin Might Find It Hard To Grow Its Dividend
The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Olin has grown earnings per share at 22% per year over the past five years. Although earnings per share is up nicely Olin is paying out 152% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.
Olin's Dividend Doesn't Look Sustainable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would probably look elsewhere for an income investment.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Olin has 4 warning signs (and 2 which shouldn't be ignored) we think you should know about. Is Olin not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.